More Control – Less Agency Slack? Refining Principal-Agent Theory

Principal-Agent theorizing continues to be based on the idea of a linear inverse relationship between principal control and the risk of agency slack: the higher the control over the agent, the less likely is the agency slack (and vice versa). This idea is based on two rather strong assumptions. First, we should see utility maximizing agents, who will slack if they are not controlled properly or sufficiently. Second, it assumes principal control to work. In this paper, we set out to empirically test these assumptions. The article conceptualizes, operationalizes, and measures member states’ control over IPAs and their slack potential across 8 major IOs (IMF, IOM, ILO, FAO, WHO, UNHCR, UNEP, NATO). On this basis, we conduct four case studies: while the ILO and UNHCR neatly fall in line with the linearity assumption, the NATO and IMF can be considered deviant cases. The case of the NATO shows that less control does not necessarily induce the agent to slack. In the IMF, we observe a high risk of slack despite high levels of principal control. We discuss our findings with regard to factors exogenous and endogenous to the principal-agent relationship and highlight especially perceptions of external challenges and mutual trust.